Shipbreakers at Alang, the world’s largest shipbreaking yard, are keenly watching how the Covid-19 crisis unfolds across the globe. Their businesses were almost wiped out during the lockdown, but the tide seems to have turned in the last month.
From a total of nine ships in April and May, the yard has seen 25 vessels arrive to be dismantled in June. In terms of tonnage, June has seen a record high for the year, at 2.68 million tonnes LDT (light displacement tonnage) (LDT). Shipbreakers are hopeful that the number of ships coming to be scrapped will increase with the Covid-19 crisis expected to peak in a month or two.
The reason for the sudden rush at Alang is that the slowdown in global trade is forcing ship owners to retire ageing vessels faster.
“Business at Alang is slowly coming back to normal after the lockdown was lifted, Four ships were dismantled in April and five in May. This has increased to 25 in June. Compare this to June 2019, when 20 ships were being broken at Alang. This is a positive sign for Alang,” said Avantika Singh, vice-chairman and CEO of Gujarat Maritime Board, the regulator of ports and maritime activities in the state.
The last time such a recession hit, in 2008-09, the light displacement tonnage handled at Alang rose from 6.41 lakh tonnes in 2007-08 to 19.31 lakh tonnes in 2008-09.
India has been facing serious competition from shipbreaking yards in Bangladesh and Pakistan. This is likely to change with growing environmental concerns. Last year, Parliament passed the ‘The Recycling of Ships Bill 2019’ which provides for regulated recycling. It includes provisions from the International Maritime Organisation’s Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009.
Vishnu Kumar Gupta, president of Ship Recycling Industries Association of India, said the upward trend will continue in July when another 25 ships are expected to arrive.
A ship owner can either sell the ship directly to a ship recycling yard or to a cash buyer. Most owners prefer the latter option because cash buyers pay a lump sum to the ship owners in cash in advance and charge a commission to close the deal.
Presently, there are 150-odd plots functional at Alang, which do business of Rs 6,000 crore a year.
“India has an advantage over other countries as Alang has the highest number of plots compliant with the Hong Kong Convention. Presently, ships from countries like Japan, South Korea, Germany and Denmark come here for dismantling,” said Jhonny Agarwal, an industry expert and founder CEO of Alang Today Information Company.
He said a number of shipowners are retiring their ships earlier due to slowdown caused by the Covid-19 crisis.
The industry is, however, facing a manpower crunch, especially given the suddenness of the boom at Alang, according to Gupta. He said many migrant workers have left for their homes after the lockdown and are yet to return. According to him, about 5,000 workers are presently engaged at Alang while the industry needs a workforce of at least 20,000.